Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — Investor Day (November 2020)
78 slides from Stora Enso Oyj Class A's investor day presentation, Nov 11, 2020
Slide 1: Meeting consumer demand for eco-friendly and circular solutions
Capital Markets Day 2020 Meeting consumer demand for eco-friendly and circular solutions President and CEO Annica Bresky 1 11 November 2020 Stora Enso CMD 2020
Slide 2: Megatrends are changing business and society
Meeting consumer demand for eco-friendly and circular solutions Megatrends are changing business and society – we contribute to mitigating climate change 2 11 November 2020 Stora Enso CMD 2020
Slide 3: We are a solution for consumers' new demands
Meeting consumer demand for eco-friendly and circular solutions We are a solution for consumers’ new demands Everything that’s made with fossil-based materials today can be made from a tree tomorrow 3 11 November 2020 Stora Enso CMD 2020
Slide 4: Our key competitive advantage is substituting materials from finite resources
Meeting consumer demand for eco-friendly and circular solutions Our key competitive advantage is substituting materials from finite resources Average annual CO2 Our products substitute Our total emissions of fossil-based products, saving climate benefit: 5.1 20 12 million cars Mt CO2 Mt CO2 4 11 Nov
Slide 5: Our products solve sustainability challenges
Meeting consumer demand for eco-friendly and circular solutions Our products solve sustainability challenges Replacing plastic Natural cosmetics Sustainable textiles Plastic-free e-commerce in food packaging & personal care and non-wovens Low-carbon Circular retail Carbon neutral buildings Sustainab
Slide 6: Shaping our business for higher growth and value
Meeting consumer demand for eco-friendly and circular solutions Shaping our business for higher growth and value Growth Packaging Materials Packaging Solutions Wood Products: Building Solutions Biomaterials: Innovations Foundation Cash Wood Products: Forest Traditional wood products Biomaterials: Pu
Slide 7: Our three focus areas for growth
Meeting consumer demand for eco-friendly and circular solutions Our three focus areas for growth – Packaging, Building Solutions, Biomaterials Innovations Packaging Materials & Solutions Wood Products: Building Solutions Biomaterials Innovations • High demand for plastic free and eco- • 10%+ annual
Slide 8: Increased focus on our innovation agenda
Meeting consumer demand for eco-friendly and circular solutions Increased focus on our innovation agenda Sustainable packaging applications Bio-based Biomaterials Innovation to replace fossil materials barrier solutions for packaging Carbon for energy storage Formed fiber Bio-binders Biofoam Carbon
Slide 9: Significant potential for profitable growth
Meeting consumer demand for eco-friendly and circular solutions Significant potential for profitable growth Building Stora Enso sales (BEUR) Biomaterials Solutions and operational EBIT margin % innovations 10 BEUR Packaging Organic growth options EBIT margin 10% 20%+ Growth and foundation Paper Tran
Slide 10: Packaging
• Packaging Materials – Leading Packaging premium packaging board supplier • Packaging Solutions – Premium sustainable solution provider 10 11 November 2020 Stora Enso CMD 2020
Slide 11: Leading position in attractive packaging materials segments
Meeting consumer demand for eco-friendly and circular solutions Leading position in attractive packaging materials segments Significant presence in both consumer and industrial 5.3 Top 10 European packaging board packaging boards producers and their capacity (million t) 4.6 Consumer packaging board
Slide 12: Leveraging strong market position with high margins
Meeting consumer demand for eco-friendly and circular solutions Leveraging strong market position with high margins Packaging Materials sales Packaging Materials operational EBIT Packaging Materials operational ROOC MEUR MEUR, % margin 0.3 17.1% 3,422 444 15.3% 3,221 3,254 3,126 396 393 0.25 13.8% 2
Slide 13: Attractive converting positions in growing markets
Meeting consumer demand for eco-friendly and circular solutions Attractive converting positions in growing markets Industrial packaging Consumer packaging converting converting Active engagement in plastic substitution Nordic countries China Annual market growth ~ 1.5%* 1 # Annual market growth ~ 9%
Slide 14: Solid returns in converting
Meeting consumer demand for eco-friendly and circular solutions Solid returns in converting Packaging Solutions sales Packaging Solutions operational EBIT Packaging Solutions operational ROOC MEUR MEUR, % margin 690 701 698 58 24.8% 604 581 46 18.9% 34 14.1% 32 13.1% 12.5% 27 8.5% 6.6% 5.6% 4.6% 4.6
Slide 15: Strategic choices for Packaging
• Significant growth opportunities for plastic free and circular packaging Strategic choices for • Attractive investment options for Packaging Materials growth Packaging • Drive packaging innovation closer to consumers • Significant opportunities for new sustainable packaging 15 11 November 2020 Sto
Slide 16: Significant growth opportunities for plastic free and circular packaging
Meeting consumer demand for eco-friendly and circular solutions Significant growth opportunities for plastic free and circular packaging Global packaging market Increased disposable Industrial packaging Consumer packaging income & urbanisation Board based Board based industrial packaging 10% consume
Slide 17: Solid global growth in consumer and containerboard
Meeting consumer demand for eco-friendly and circular solutions Solid global growth in consumer and containerboard Annual demand growth of consumer board and containerboard* combined in 2020 - 2030 and market sizes (2019) Global demand split 2019 Consumer board +2.9% 21% Containerboard +1.7% +2.9% +
Slide 18: Attractive investment options for Packaging Materials growth
Meeting consumer demand for eco-friendly and circular solutions Attractive investment options for Packaging Materials growth Focus on brownfield investments, debottlenecking and improving operational efficiency Oulu Varkaus Develop world leading cost Fors Heinola Imatra competitive integrates Skogha
Slide 19: Step change in premium kraftliner
Meeting consumer demand for eco-friendly and circular solutions Step change in premium kraftliner, ~300 MEUR sales increase in 2022 Stora Enso containerboard capacity AvantForte – a new premium kraftliner (kt) with superior purity and strength: 1,865 • Global product for food and +98% e-commerce app
Slide 20: Opportunity to grow Consumer Board in Skoghall
Meeting consumer demand for eco-friendly and circular solutions Opportunity to grow Consumer Board in Skoghall Strategic rationale Start feasibility study and environmental impact assessment Q4/2020 Capture growth in Leverage favourable • Pulp capacity +410 kt LPB and CKB fibre supply • Board capaci
Slide 21: Drive packaging innovation closer to consumers
Meeting consumer demand for eco-friendly and circular solutions Drive packaging innovation closer to consumers Collaborations and partnerships Options for growing downstream exposure in packaging • Leverage partnerships and Raw material Brand suppliers Packaging Retailers collaborations converters o
Slide 22: Significant opportunities for new sustainable packaging
Meeting consumer demand for eco-friendly and circular solutions Significant opportunities for new sustainable packaging Formed fiber Biofoam Biobarriers and films Market growth (CAGR 2020 - 2030) 3% 6% 3% Total market size (BEUR, 2020e) 30 15 80 EBIT margin Supporting potential 30% 35% existing busi
Slide 23: Significant growth potential with 20%+ margin
Meeting consumer demand for eco-friendly and circular solutions Significant growth potential with 20%+ margin Stora Enso Packaging Materials and Packaging Solutions sales (BEUR) and operational EBIT margin % EBIT margin on growth 3.8 20%+ 3.5 Organic growth options 10% 10% 2017 2019 Future state (il
Slide 24: Wood Products
• Building Solutions – Leading supplier Wood of wood-based construction solutions • Traditional wood products – Largest Products producer of classic sawn and planed wood in Europe 24 11 November 2020 Stora Enso CMD 2020
Slide 25: Leading market positions in Europe and globally
Meeting consumer demand for eco-friendly and circular solutions Leading market positions in Europe and globally Traditional wood products Total market size (BEUR) % Stora Enso market share Europe’s biggest sawmilling Europe 4% 21 company Asia 2% 22 North America <1 % 29 2nd largest global supplier o
Slide 26: Strong foundation for Building Solutions growth
Meeting consumer demand for eco-friendly and circular solutions Strong foundation for Building Solutions growth Traditional wood products Building Solutions • ~5% operational EBIT -margin business over a cycle • ~20% operational EBIT -margin business • ~2% market growth • ~10% market growth • Platfo
Slide 27: Wood Products delivers solid margins
Meeting consumer demand for eco-friendly and circular solutions Wood Products delivers solid margins Wood Products sales Wood Products operational EBIT Wood Products operational ROOC MEUR MEUR, % margin 1,669 165 28.1% 1,595 1,622 1,569 1,400 20.5% 111 105 96 16.8% 16.6% 88 15.2% 10.2% 6.7% 6.7% 6.9
Slide 28: Strategic choices for Wood Products
• Attractive growth opportunities Strategic choices for in Building Solutions • Capturing a larger share of the Wood Products value chain 28 11 November 2020 Stora Enso CMD 2020
Slide 29: Attractive growth opportunities in Building Solutions
Meeting consumer demand for eco-friendly and circular solutions Attractive growth opportunities in Building Solutions The global wood-based 2030 market share Building Solutions market and value by geography (BEUR) Carbon storage & safer 9 workplaces 2.3 BEUR Lower building costs & faster constructio
Slide 30: Global market leader of wood-based Building Solutions
Meeting consumer demand for eco-friendly and circular solutions Global market leader of wood-based Building Solutions Stora Enso Cross Laminated Timber Stora Enso global CLT (CLT) capacity (k m³) market share in 2020 360 +44% 250 20% 80% 2020 After Ždírec investment Bad St. Leonhard Ybbs Varkaus Gru
Slide 31: Capturing a larger share of the value chain
Meeting consumer demand for eco-friendly and circular solutions Capturing a larger share of the value chain Architect Construction Building company owner Plan Build Live Re-use Building concepts Prefabrication CLT360+ RFID sensors 31 11 November 2020 Stora Enso CMD 2020
Slide 32: Ambition to triple sales from Building Solutions
Meeting consumer demand for eco-friendly and circular solutions Ambition to triple sales from Building Solutions Wood Products’ sales split and operational EBIT margin Traditional wood products Building Solutions 20% margin 1.6 1.6 on growth 6% 7% 2016 2019 Future state (Illustration, not forecast)
Slide 33: Biomaterials
• Integrated pulp producer with Biomaterials cost efficient stand alone assets • Innovations to replace fossil- based products 33 11 November 2020 Stora Enso CMD 2020
Slide 34: Integrated producer with cost efficient stand alone assets
Meeting consumer demand for eco-friendly and circular solutions Integrated producer with cost efficient stand alone assets Top 10 chemical pulp producers globally and their capacity (million t) One of the top 10 largest chemical pulp 15 producer globally 12 60% of all our pulp is 8 8 used internally
Slide 35: Attractive margins and returns over the cycle
Meeting consumer demand for eco-friendly and circular solutions Attractive margins and returns over the cycle Biomaterials sales Biomaterials operational EBIT Biomaterials operational ROOC MEUR % rolling 5 year average margin rolling 5 year average 1,635 427 17.9% 1,483 1,464 1,376 1,220 11.6% 11.8%
Slide 36: Strategic choices for Biomaterials
• Focus on strengthening Strategic choices for competitiveness Biomaterials • New biomaterials are a highly attractive innovation platform 36 11 November 2020 Stora Enso CMD 2020
Slide 37: Focus on strengthening competitiveness
Meeting consumer demand for eco-friendly and circular solutions Focus on strengthening competitiveness Delivered cost – Standard market pulp Delivered cost per tonne • Market pulp not a focus area for growth Strengthen the competitiveness • Investments in integrated pulp to support Packaging Materia
Slide 38: New biomaterials are a highly attractive innovation platform
Meeting consumer demand for eco-friendly and circular solutions New biomaterials are a highly attractive innovation platform Carbon for energy storage Bio-binders Carbon fibers Market growth (CAGR 2020 - 2030) 30% 2 - 4% 8 - 10% Total market size (BEUR, 2020e) 10 20 3 EBIT margin potential 35% 35% 3
Slide 39: Forest
Forest • One of the largest private forest owners globally • Strong sourcing position securing raw material supply 39 11 November 2020 Stora Enso CMD 2020
Slide 40: Forest assets fair value increase to 6.5 - 7.0 BEUR
Meeting consumer demand for eco-friendly and circular solutions Forest assets fair value increase to 6.5 - 7.0 BEUR Group forest assets Stora Enso productive forest land areas at end of 2019 BEUR 6.5 - 7.0 Swedish forests Tornator (41%) 1 145 000 ha Finland 262 000 ha 5.4 Veracel (50%) Guangxi, Chin
Slide 41: Stable financial returns
Meeting consumer demand for eco-friendly and circular solutions Stable financial returns Forest sales Forest operational EBIT Forest operational ROOC MEUR MEUR, % margin 2,285 2,321 154 5.8% 2,090 2,121 2,076 5.6% 4.7% 101 99 3.9% 94 88 3.3% 7.4% 4.5% 4.8% 4.3% 3.9% 2016 2017 2018 2019 LTM 2016 2017
Slide 42: Strategic choices for Forest
• The leader in sustainable forest Strategic choices for management Forest • Innovation to increase forest growth 42 11 November 2020 Stora Enso CMD 2020
Slide 43: The leader in sustainable forest management
Meeting consumer demand for eco-friendly and circular solutions The leader in sustainable forest management Biodiversity Climate benefits Preserving local Capturing C02 from the biodiversity and culture atmosphere Land use Community Safeguard ecosystems Maintain prosperity of while optimising social
Slide 44: Innovation to increase forest growth
Meeting consumer demand for eco-friendly and circular solutions Innovation to increase forest growth Precision forestry Tree breeding and and digitalisation biotechnology Accurate and timely Increased yield, disease operations and efficient use resistance, and improved of digital opportunities wood
Slide 45: Target to increase sustainable harvesting by 10 - 15% in Sweden
Meeting consumer demand for eco-friendly and circular solutions Target to increase sustainable harvesting by 10 - 15% in Sweden Long-term harvesting plan in Sweden for 2020 - 2040 (m³ solid under bark) million m³ 4.5 Innovation and forest management 0.5 driving higher harvesting 3.5* 0.5 *Adjusted t
Slide 46: Paper
Paper • Cash flow generator to fund our growth • Adopting to structurally declining markets 46 11 November 2020 Stora Enso CMD 2020
Slide 47: Structural paper demand decline continues
Meeting consumer demand for eco-friendly and circular solutions Structural paper demand decline continues European paper (Excl. wood free coated) demand European paper demand by end use (million t) 35 CAGR: -4.6% Other commercial 30 Direct mail 25 CAGR: -5.5% 21 Insert & Flyers Copy paper 17 15 Cata
Slide 48: Successful cash management despite sales decline
Meeting consumer demand for eco-friendly and circular solutions Successful cash management despite sales decline Stora Enso paper capacity Paper division sales and cash flow after (kt) investing activities to sales % MEUR 12.3 Mt 4 839 4 319 3 912 3 630 3 245 -68% 2 920 3 066 2 856 2 197 3.9 Mt* 8%
Slide 49: Focus on cash flow
Meeting consumer demand for eco-friendly and circular solutions Focus on cash flow Paper sales Paper operational EBITDA Paper cash flow after MEUR MEUR, % margin investing activities to sales 3,245 345 9.3% 3,066 326 318 8.6% 2,920 2,856 2,197 240 5.5% 5.7% 11.3% 11.1% 10.1% 118 8.2% 2.4% 5.4% 2016
Slide 50: Strategic choices for Paper
• Strong cash generation through Strategic choices for cost reductions and active Paper capacity management • Higher operational independence to adapt to challenging market conditions 50 11 November 2020 Stora Enso CMD 2020
Slide 51: Strong cash generation through cost reductions and capacity management
Meeting consumer demand for eco-friendly and circular solutions Strong cash generation through cost reductions and capacity management Managing costs in a declining • Focus on cost reductions and market Sales (BEUR) 3.5 Net fixed costs (%) 25% working capital • Capacity management through 3.0 20% co
Slide 52: Higher operational independence to adapt to challenging market conditions
Meeting consumer demand for eco-friendly and circular solutions Higher operational independence to adapt to challenging market conditions Increased focus on the particular needs of the Paper business Fit-for-purpose processes and tools Allowing scalability of costs 52 11 November 2020 Stora Enso CMD
Slide 53: Value creating capital allocation, supported by strengthening balance sheet
Value creating capital allocation, supported by strengthening balance sheet CFO Seppo Parvi 53 11 November 2020 Stora Enso CMD 2020
Slide 54: Value creating capital allocation, supported by strengthening balance sheet
Value creating capital • Forest fair value increases allocation, supported • Focus on cash flow • Selective capital allocation by strengthening • Revised long-term financial targets balance sheet 54 11 November 2020 Stora Enso CMD 2020
Slide 55: Forest fair value increases
Forest fair value increases 55 11 November 2020 Stora Enso CMD 2020
Slide 56: Why change forest assets fair valuation method now?
Importance of forests increased as a valuation driver • Forests are a significant part of our balance sheet Why change • Significant difference between the market values and balance sheet values forest assets • Market practice for forest valuation changing in the Nordics fair valuation As of Q4/2020
Slide 57: Changes in the forest valuation methodology
Meeting consumer demand for eco-friendly and circular solutions Changes in the forest valuation methodology Starting at year end 2020 Sweden Tornator (41%) Plantations (Finland, Estonia & Romania) (Brazil, Uruguay and China) Forest assets Market transaction- based method Biological Allocation of for
Slide 58: Increasing forest fair value to 6.5 - 7.0 BEUR
Meeting consumer demand for eco-friendly and circular solutions Increasing forest fair value to 6.5 - 7.0 BEUR Group forest assets BEUR Biological assets Forest land 6.5 - 7.0 Market transaction-based valuation method in Sweden 5.4 • Market transactions in the Stora Enso forest regions 0.8 • Standin
Slide 59: Forest asset valuation method change – significant forest land value increase in Sweden
Meeting consumer demand for eco-friendly and circular solutions Forest asset valuation method change – significant forest land value increase in Sweden Biological assets in Sweden Forest land in Sweden Preliminary market transaction- BEUR BEUR based price per hectare range is EUR 4 190 - 4 620 3.4 -
Slide 60: Stora Enso forests are mainly in Central Sweden
Meeting consumer demand for eco-friendly and circular solutions Stora Enso forests are mainly in Central Sweden SEK/m3fo Market transaction based forest prices in Sweden 800 Price changes per region in 1-6/2020 (y-o-y): Central +6.9%, 700 Northern +5.1%, Southern -2.7% 600 500 Large differences betw
Slide 61: Large private forest owner with more than two million hectares of forests
Meeting consumer demand for eco-friendly and circular solutions Large private forest owner with more than two million hectares of forests Nordic companies’ productive Nordic companies’ forest land at end of 2019 forest assets fair valuations > 2 million ha of forest land Million hectares BEUR and 1.
Slide 62: Stora Enso's global forest assets – significant share of the balance sheet
Meeting consumer demand for eco-friendly and circular solutions Stora Enso’s global forest assets – significant share of the balance sheet All figures total forest assets including biological Sweden assets and forest land Tornator (41%) 4.8–5.3 BEUR (Market transaction- 803 MEUR based range) (DCF) (
Slide 63: Focus on cash flow
Focus on cash flow 63 11 November 2020 Stora Enso CMD 2020
Slide 64: Strong cash flow despite lower profitability in 2020
Meeting consumer demand for eco-friendly and circular solutions Strong cash flow despite lower profitability in 2020 Cash flow from operations Cash flow from operations, MEUR Cash flow to sales 2 500 25% 2 000 20% 1 500 15% 1 000 10% 500 5% 0 0% 2016 2017 2018 2019 LTM LTM = Q4/19 - Q3/20 64 11 Nove
Slide 65: Further intensified profit protection programme and working capital management due to Covid-19
Meeting consumer demand for eco-friendly and circular solutions Further intensified profit protection programme and working capital management due to Covid-19 Group continuous annual savings Operative working capital Fixed costs Variable costs Operating working capital (period end) MEUR MEUR 200 1,8
Slide 66: Continued focus on liquidity
Meeting consumer demand for eco-friendly and circular solutions Continued focus on liquidity Taking opportunity of the Strong liquidity No financial covenants long-term bond market to at 2.2 BEUR on Stora Enso Oyj’s debt prolong maturity structure Liquidity Maturity profile MEUR Revolving credit fac
Slide 67: Selective capital allocation
Selective capital allocation 67 11 November 2020 Stora Enso CMD 2020
Slide 68: Capex allocated to our focus areas for growth
Meeting consumer demand for eco-friendly and circular solutions Capex allocated to our focus areas for growth Packaging Materials & Solutions Wood Products: Building Solutions Biomaterials: Innovations Significant growth potential with 3x sales from Building Solutions with 35%+ margin in novel marke
Slide 69: Selective capex to support growth
Meeting consumer demand for eco-friendly and circular solutions Selective capex to support growth 2021 capex planned on 2020 level MEUR 729 675 - 725 675 - 725 640 656 574 Biological capex Strategic capex Maintenance capex Capex estimate for 2020 and 2021 Oulu Mill kraftliner conversion Depreciation
Slide 70: Strong cash flow to support growth and distribution to shareholders
Meeting consumer demand for eco-friendly and circular solutions Strong cash flow to support growth and distribution to shareholders Strong cash flow generation Allocating capital for Returning capital sustainable profitable growth to shareholders To distribute CAPEX at Selective M&A 50% of EPS or be
Slide 71: Revised long-term financial targets
Revised long-term financial targets 71 11 November 2020 Stora Enso CMD 2020
Slide 72: Revised long-term financial targets
Meeting consumer demand for eco-friendly and circular solutions Revised long-term financial targets Group long-term financial targets New targets Comparison to current targets To distribute 50% of EPS excluding fair Dividend* To distribute 50% of EPS over the cycle valuation over the cycle Growth**
Slide 73: Value creating capital allocation, supported by strengthening balance sheet
Value creating capital • Forest fair value increases allocation, supported • Focus on cash flow • Selective capital allocation by strengthening • Revised long-term financial targets balance sheet 73 11 November 2020 Stora Enso CMD 2020
Slide 74: Shaping our business for higher growth and value…
Meeting consumer demand for eco-friendly and circular solutions Shaping our business for higher growth and value… Growth Packaging Materials Packaging Solutions Wood Products: Building Solutions Biomaterials: Innovations Foundation Cash Wood Products: Forest Traditional wood products Biomaterials: P
Slide 75: …by focusing on our three leading positions
Meeting consumer demand for eco-friendly and circular solutions …by focusing on our three leading positions Packaging Materials & Solutions Wood Products: Building Solutions Biomaterials: Innovations Significant growth potential with 3x sales from Building Solutions with 35%+ margin in novel markets
Slide 76: Capital Markets Day 2020
Capital Markets Day 2020 Meeting consumer demand for eco-friendly and circular solutions 76 11 November 2020 Stora Enso CMD 2020
Slide 77: Disclaimer
Meeting consumer demand for eco-friendly and circular solutions Disclaimer It should be noted that Stora Enso and its business are exposed to various risks and uncertainties and certain statements herein which are not historical facts, including, without limitation those regarding expectations for m
Slide 78: The Renewable Materials Company
THE RENEWABLE MATERIALS COMPANY